Notebook of a Share Trader

Why do People Fail in Stock Market !

In today’s world, people are looking for easier ways to get rich quicker and have discovered stock market as their one of investment option. Considering the extensive media coverage that stock market gets and the amount of business news it covers, it covers average people with its impression that one can start out with little and multiply it. It takes quite a while, to be specific after losing some lump sum, people come to realize stock markets are not as easy as they seem to be. Below are such reasons, which rather try to prove why people cannot earn at stock market.

Lack of Knowledge in stock market

Lack of knowledge makes you fail in any field and stock market is the same. The major problem with stock market is that anybody may join it at any time. So being unaware of the bits and pieces of the market, anyone easily lose considerable sum of money in a short duration. The main reason behind is nothing but lack of knowledge. If you don’t learn all about the market first, you are setting yourself up for failure and it is the case with most of people in there.

Expectation and dream of being richer quickly

Humans by nature are inclined to getting richer quickly. Those who are innovative find their own way while others view stock market as a place to get rich quickly, or at least as an easy way to make money. But that’s not the case. There are numerous things that you need to devote to but most people treat stock market as their part time investment sector. Only few realize “If anybody could jump right in and make a fortune then everybody would be rich”. With less time and effort to understand the market, it is eminent s/he will fail.

Following Experts of Television and Newspaper

It’s quite well known fact that people willing to make investments are always in search for some direction. In today’s busy world, people don’t have time to seriously think about investment and they tend to invest in stock markets as part time activity. So in ever so small time they have, they try to catch up with the TV programmes that offer investment ideas. Unfortunately, TV is not always the best source of information or to say stock shows are not the best source of investment advice. Their ultimate goal is to attract viewers, boost ratings, and charge more for advertisements. So one needs to be creative of what to extract from TV and use it to properly channelize the investment. For average people, with their limited knowledge, it’s difficult and hence more often than not they end up making losses in the stocks.

Prediction and Anticipation of event to follow

Prediction and Anticipation are two such terminologies that are linked up with stock market for many years now. In simpler way, investment in stock market is predicting and anticipating for the best and it would be wrong if we define it as gambling. This is because in gambling you lose more often than you win. More people would argue on it, but it’s the fact that “you are putting your money on an event that may or may not happen”. Your prediction might be true if you are adept in predicting supported by your knowledge in the domain. But for an average Joe it’s same as gambling as and more frequently than not, they tend to park their cars on the wrong side of the road.

Misinterpretation of losing stocks

Share market has move ups and move downs. But it’s crucial how to act and react stock starts tumbling down. If the stocks were really strong and in demand, then would it be dropping lower? That’s one simple question that an average Joe misses out in every Bear run. Instead of knowing the basics on the downfall, average investors immediately tend to jump and buy those stocks. Now instead of analysing the reason for the drop, more people buy end up buying wrong stock driven by the dream of selling it high. But in fact it’s just the way of losing and nothing more.

Do not know How to exit stock market

Reaching this point of the article, it’s well know to all of that earnings in the stock market are based on stock transactions. But the greed is one such element that makes you lose. If you don’t know when to sell and take a profit, then your profit can easily turn into a loss. It is absolutely crucial to sell the stocks at the right time, but for average people it’s very difficult to decide when  the “right time” is. Due to this, these investors keep the stocks, with an ultimate to sell at higher prices, even when the prices have topped. This classical trap is what the novice investors fall to and they end up making losses.

Stock markets are not for small investors

G0vernment always try to promote small investors, but small investors are almost neglected by stock market and the brokerage firms and they want big investments. These so called advisors and consultancies make good profit in volume. If you are a small investor, who has few hundred dollars to invest, you might never get professional help from these advisers, as their commissions tend to be very hefty. This, unfortunately, makes small investors to other sources like TV etc., which again might not be the perfect tool to base your investment on. Hence it is clear that stock market was never designed keeping small investors in mind.

Market Volatility & Scam

Even though you have so many, countless, number of experts, it’s amazing how many of them could not predict any of the crisis of the stock market. In Indian history of stock market 1992 Harshad Mehta scam, 1998 Ketan Paekh scam, 2000 IT bubble, 2007 sub-prime crisis that was looming over the US economy in the late 2007and also Indian economy. This is just some of the examples. If you turn the pages of history, you will see many such incidents where the experts have not been able to predict the “bust”. This unpredictable nature of the stock market is one of the reasons why an average investor should not try to enter the market. Instead it will be better if such investors invest in Government bonds or for that matter even put their hard working funds in the banks.

World Market

It’s complicated world out there due to globalization many countries are now linked with each other directly or indirectly and for the small investors it is complicated to understand. This is one of the reasons why if a stock market crashes in Britain it will impact US, African, Asian and European markets. Investors outside Britain may think that “oh I am not in Britain..hence I am save”. But that is not the case. If houses, supported by bank loans, start tumbling down in the US, the ripples are felt world wide. Because of such intricate relationship of many factors, many investors tend to miss such events and hence end up losing their monies in the stock market.

Too many cook spoil the dish

Today, the market is littered with thousands of sources that provide information on the stock market. We have TV programmes, newspapers, websites, blogs, advisers, consultants who/which provide information on what to buy/sell/hold and when to buy/sell/hold. So you might see that company XYZ might be kept as “buy” by one consultant while the same may be kept as “sell” by another consultant. If you were to follow both of them, you would definitely get confused and do not invest at all. Hence with such plethora of sources, investors tend to be more confused than decisive when it comes to investing. This ultimately makes the investors to take the wrong strategies at crucial times which eventually become costly and investors end up losing their hard earned money.

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